Why Credit Card Borrowing Remains Costly for Consumers

ABOUT THE EPISODE In this interview, Itamar Drechsler explains that credit card APRs stay high because defaults and interest rates account for only part of the cost, while surprisingly large operating expenses, especially marketing, make up a lot of the rest. He adds that rewards are funded mainly through interchange fees paid by retailers, not through high APRs, and that marketing-driven consumer behavior gives big issuers market power over lower-rate options like credit unions. Drechsler also notes that many banks offer lower-rate personal loans than their own credit cards, likely because these products require far less marketing.

ABOUT THE PODCAST This Week in Business features interviews with Wharton faculty about the latest news, fascinating trends, and issues impacting both consumers and the business world. Episodes are recorded at the Wharton School and published twice per week.

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